Although past performance is not a guarantee of success in the future, there are a number of core funds that have performed consistently well over the last 10 years, and this is important to consider when choosing a suitable vehicle for your stocks and shares ISA investments.
Stocks and shares ISAs are well-suited to longer term investments, typically at least five years, to show a good return.
It is also wise to seek professional financial advice and consult an experienced fund manager who will navigate the markets efficiently to identify funds that will provide you with a good return.
The following funds have featured in the top quartile (25%) of their peer group over one, three, five, and 10 years, according to FE and can all be used for stocks and shares ISA investments.
Best Performing Equity Income Funds
The UK equity income fund sector has always been a popular choice for investors wanting to derive an income from high-profile UK companies.
- The Royal London UK Equity Income Fund – 113% over 10 yrs
The Royal London UK Equity Income fund has run for over 30 years and has delivered returns of 113% over 10 years, compared with 72% from the FTSE All Share Index.
- The fund’s historic yield is 3.6% and targets a combination of growth and income.
- Fund manager Neil Cholwill seeks out stocks that are undervalued but pay a consistent income.
- Franklin UK Equity Income – 87% over 10 yrs
The Franklin UK Equity Income fund currently has assets totalling £322m and boasts 87% returns over the past 10 years, with an historic yield of 4%.
Best Performing UK ‘all companies’ Equity Funds
UK ‘all companies’ equity funds are the most popular type of fund, receiving over £163bn in investors’ cash.
The funds invest money in UK companies, ranging from small organisations to major corporate bodies.
Returns from funds in this sector range from 98% to 152% over 10 years.
- Barclays UK Opportunities – 111% Over 10 Yrs
- The Barclays UK Opportunities fund is managed by the bank itself and invests money in funds rather than stocks.
- The fund splits its investments between three asset managers: Heronbridge, JO Hambro Capital Management, and Lindsell Train.
- It has delivered 111% over 10 years.
Special Situations Funds Ideal for Your ISA
Special situations funds generally look outside of the usual stocks and often buy businesses that are in trouble.
- The Fidelity Fund – 113% over 10yrs
The Fidelity fund has almost £3bn in assets and invests in UK companies of all sizes. It also focuses on money market instruments and derivatives and has delivered a 113% return over the last 10 years.
- The Jupiter Fund – 120% over 10yrs
The Jupiter fund, run by Ben Whitmore, focuses on low-value companies and those that are out-of-favour and has returned 120% over 10 years.
Best Performing Absolute Return Funds
The absolute return funds sector is made up of a wide range of different funds, which aim to make money when markets are either falling or rising.
In order to achieve this, the funds are typically invested in a spread of investments, including cash, bonds, and stocks.
- The Ruffer Absolute Return Fund – 121% over 10yrs
This fund is the only absolute return fund to show a good first-quartile performance over one, three, five, and 10 years.The fund aims to guard your capital, no matter whether the markets are rising or falling. It is also intended to deliver a stable investment return over and above that generated by cash alone.It also aims to give higher returns than the UK stock market over a longer term investment period.The fund has delivered 121% over the last 10 years, compared with just 72% offered by the FTSE All Share index.
The fund currently has holdings with Mitsubishi Financial and Lloyds Banking Group.
Best Performing US Equity Funds
The US stock market is extremely well-researched, making it difficult for fund managers to find potential sources of hidden returns that can be exploited by investors.
It is for this reason that many UK investors decide to opt for passive investments for exposure to the US market.
Passive investments are designed to simply ‘track’ the US market, rather than an ‘active’ fund that chooses specific stocks and shares to invest in.
However, there are still several funds that perform consistently well and are worth including in this list.
- Old Mutual North American Equity Fund – 256% over 10 yrs
The Old Mutual North American Equity fund is worth £1.8bn and was first launched in 1985.Since 2011, it has been run successfully by three experienced fund managers: Mike Servent, Amadeo Alentorn, and Ian Heslop.The fund has returned 256% over 10 years, in comparison with the MSCI North America index, which returned just 217%.The Old Mutual North American Equity fund focuses its investment efforts in high-profile companies, such as Apple, Bank of America, and Facebook.
- Schroder US Mid Cap Fund – 263% over 10 years
Launched in 2005, Schroder US Mid Cap boasts £1.9bn in assets and invests much of its fund in mid-sized US firms.The fund’s US based manager, Jenny Jones, has been with the fund since its launch and works on the principle that mid-sized firms will ultimately outperform their larger competitors over the longer term.This idea seems to work well, as the fund has returned 263% to investors over the last 10 years.
When placing your money in stocks and shares ISAs, it’s important to choose the right selection of funds and managers in order to see a good return on a longer term investment.
The right diversified mix for you depends on your risk profile and your investment horizon (how long you plan on holding and paying into the funds). Diversifying fund choice can help even out the performance of your portfolio as a whole, instead of only concentrating in one area alone.
For example, choosing riskier mix of stocks and shares funds when young than someone who is approaching retirement is a common strategy.
Most finance professionals also advise to drip feed investments into your fund choices, which will help ride out fluctuations over time, as well as accrue loyalty bonuses.
Before committing any significant sums of cash, always seek the advice of an experienced financial advisor as any form of investment always carry a risk, especially for the inexperienced.Last updated: November 17th, 2017